In a recent article for ETF.com, BAM Alliance director of research Larry Swedroe outlines findings of an August 2018 study on factor-based investing titled, “The Cross-Section of Equity Returns in Emerging Markets.”
Among the many findings of the study–which covers 27 emerging market countries for the period between 1988 and 2014—here are some highlights:
- Size, value and momentum anomalies are statistically significant using value-weighted portfolios;
- After controlling for company size, the book-to-market ratio and momentum anomalies remain significant;
- Larger companies appear to have lower expected returns (although the study found that the pattern is not uniform);
- Stocks with higher book-to-market ratios “demand higher expected returns.”
The article also cites a 2013 report that provides supporting evidence of a profitability premium in emerging markets.
The article concludes that the research provides evidence supporting “the pervasiveness of the size, value and momentum premiums,” adding, “That should give investors further confidence that the premiums found in these factors in developed markets were not a result of data mining exercises, which, in turn, should offer confidence that an ex-ante premium for these factors exists around the globe.”